Beggars with bulging wallets

I take it we will hear no more about “the fiscal imbalance.” Well, the provinces may attempt to preserve the façade, holding out a beggarly hand even after this riotous display of excess. But there is no way the new federal government can possibly pay them any heed. Not any more. Not after this. The Conservative love affair with the provinces -- all that rot about them being “closer to the people,” all that sympathetic clucking over the terrible privations forced upon them by those reckless spendthrifts in distant “Ottawa” -- has just ceased. Or must, if they wish to be taken seriously. Three provinces, Alberta, Ontario and Quebec, have brought forth budgets in the last 48 hours that, differ as they may in the detail, together present a picture of unprecedented provincial wealth, wealth so great that finance ministers were forced to some considerable lengths to find ways to spend it. The least important number, in the midst of this torrent of revenues, is the one they all like to trumpet: the budget balance. Alberta has a $4.1-billion surplus, not because it has exercised the slightest muscle of restraint -- program spending, in a province that is already among the biggest spenders in the country, shot up 8% in the last year -- but because of the oil boom. That Ontario, on the other hand, still manages to show a deficit, is not because it is short of revenues. No government in the history of Ontario has had as much revenue at its disposal as the current government of Ontario. Total revenues from all sources this year will exceed $6600 per capita. By way of comparison, the Harris government took in about $5700 a year, on average, in constant 2005 dollars. (Because it slashed taxes? No: the previous NDP government under Bob Rae, which raised taxes, got by on just $4900 and change from each of its citizens.) But even in the face of this extraordinary richesse; even after a one-third increase in personal income tax revenues since it took office; even after a nearly 50% increase in corporate income tax revenues in the same period; even after an “unanticipated” $2.25-billion windfall in the last fiscal year -- still the Ontario government somehow labours to produce a deficit. How does it do it? By spending more than any government in Ontario’s history: more than $6000 per capita this fiscal year and next -- one-fifth more than the Harris government averaged, after inflation. Indeed, it is 10% more than the Rae government spent, which was a) governing in a recession, and b) crazy. And then there’s Quebec. The most heavily taxed, heavily indebted province in the country has at least taken notice of the latter difficulty. Its proposal to earmark for “debt reduction” the royalties it will now charge itself -- technically, Hydro-Quebec -- for the water used to generate hydro-electric power is gimmicky: it’s all the same pool of revenues, however you label it. But it at least shows some commitment to reduce the province’s monstrous debt burden (and levels the playing field for private power producers in the bargain). Of course, another way to show the same commitment would be to rein in public spending -- not hard to do, one would have thought, given the excesses of previous governments, whose record could charitably be described as Rabelaisian. Yet spending increased last year by 4%. The president of Treasury Board, Monique Jerome-Forget, was reduced to bleating that her government had shown the tightest control over spending of any province other than Prince Edward Island. (Ah yes: the PEI standard. Known the world over as the benchmark of fiscal discipline. The Swiss send delegations to learn their secrets.) Of course, part of the reason the provinces are so loose with the coin is the benefactions of Uncle Ottawa, which Ontario and Quebec in particular have proved adept at squeezing in all the right places. The McGuinty government, which made the fictional “$23-billion gap” its war-cry, quietly pocketed over $13.2-billion in federal cash last year, a 34% increase from just two years ago. Quebec, likewise, enjoyed an 8% increase in the last fiscal year. But they’re also swimming in own-source revenues -- the money they extract from their own citizens, rather than from the rest of Canada. Are any of these finance ministers proposing to give more than a token amount of it back? Not on your life. Indeed, they boast of their unwillingness to do so. “It would be totally irresponsible,” Alberta’s Shirley McLellan declaims, “to use a surplus for a one-time tax cut.” Yes, it would, if what she’s talking about are the $400 rebate cheques her premier likes to hand out. But a cut in marginal income tax rates isn’t a one-time thing: it’s a permanent contribution to raising productivity across the province’s economy -- an investment if you like, that will pay dividends every year in perpetuity. Of course, they can’t plead poverty if they’re cutting taxes. But they can’t plead poverty if they aren’t. The “fiscal imbalance” was always a made-up issue, even when provincial coffers were less obviously full. After this show, it’s a joke.